The Bitcoin-Gold Relationship Takes a New Turn

There was a significant change in the market structure observed as the relationship between Bitcoin and Gold took a new turn.

It is clear that investors are currently fleeing both bitcoin and gold amidst a strengthening US Dollar and rising interest rates. This has negatively impacted both the world’s largest cryptocurrency and the precious metal.

The correlation between the two has shifted and hit its highest level in more than a year, resulting in positive changes for both.

Bitcoin and Gold Correlation: How the Two Assets Stack Up Against Each Other

What does the future hold for bitcoin and gold? Bitcoin and gold have had a tumultuous relationship over the past year. Their correlation has been all over the place, sometimes positive and sometimes negative. But this year has been particularly tough for both cryptocurrencies and traditional markets. What does the future hold for these two assets? Only time will tell. But one thing is for sure: both bitcoin and gold will continue to be volatile and unpredictable.

It's clear that bitcoin is not immune to inflationary pressures, despite initial hopes that it could act as a hedge against rising prices. This makes it all the more important for investors to monitor the situation closely and make decisions accordingly.

While the cryptocurrency market has taken a beating this year, with bitcoin down over 70% from its all-time high last November, gold has held its own. Despite concerns about aggressive US rate hikes this year, the non-yielding metal has maintained its appeal, losing only 10% of its YTD gains.

It is clear that gold is no longer acting as a safe-haven asset, even as core inflation remains persistently high. This shift in the market structure is concerning, and it will be interesting to see how this plays out in the coming months.

Bitcoin-Gold Correlation. Source: Kaiko Research
There is a strong correlation between the price of Bitcoin and the price of gold, according to new research from Kaiko.

Jolted Investor Confidence in 2022

It is clear that Bitcoin has lost its luster in the market as an inflation hedge and store-of-value. Investors are now more interested in low-risk assets, which is understandable given the volatility of cryptocurrencies. However, market experts still believe that Bitcoin is a highly profitable asset for middle- and long-term investors.

On the bright side, a high hash rate, accumulating sentiment dominating among long-term holders, low exchange supply, and expanding institutional interest may prove beneficial for a potential BTC rally. These positive indicators could lead to a strong Bitcoin price recovery in the near future.

Looking at the current state of the gold market, it is clear that the precious metal is in need of a boost. For prices to recover, Ole Hansen of Saxo Bank believes that the market must reach a state of peak hawkishness. This means that investors must become more confident in the economy and inflationary pressures must be kept in check. While there are always risks that could derail this recovery, it is encouraging to see that there are those who are confident in gold's ability to bounce back.

“Gold and the other semi-investment metals like silver and platinum will likely to continue to remain under pressure until the market reach peak hawkishness, potentially not before 4% is reached in 10-year yields and the dollar squeezes out any remaining short positions. Whether the turning point will be reached before year-end remains to be seen.”

The post Bitcoin and Gold Correlation Spikes to Yearly Highs appeared first on CryptoPotato. This is yet another indicator that points to Bitcoin becoming more and more like digital gold. And, as we all know, gold is a very stable and valuable asset.